Scenario 1-3 Suppose a T-Shirt Manufacturer Currently Sells 5,000 T-Shirts Per Week

question 12

Multiple Choice

Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts."
-Refer to Scenario 1-3. Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much?

• A) Its profit will be $4,800 higher.
• B) Its profit will be $800 higher.
• C) Its profit will be $800 lower.
• D) Its profit will be $4,000 lower.

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Definitions:

Government Agency

An organization established by the government to implement policy, carry out public services, or regulate activities within its jurisdiction.

Incentives

Factors, monetary or non-monetary, that motivate individuals or entities to behave in certain ways.

Social Choice

A theoretical framework for analysis of combining individual preferences, interests, or welfare to reach a collective decision or social welfare in a given society.

Aggregating

The process of combining multiple pieces of data or information into a single comprehensive whole.